• Gold attracts some buyers after touching a one-week low during the Asian session on Wednesday.
• The USD remains depressed amid the BoJ-inspired JPY rally, lending some support to the commodity.
• Fed hike bets and geopolitical risks could limit USD losses and cap the bullion ahead of US inflation data.

Gold (XAU/USD) builds on its intraday recovery from a one-week low and reclaims the $4,400 mark heading into the European session on Wednesday. The commodity, for now, seems to have snapped a three-day losing streak amid a weaker US Dollar (USD), which remains depressed near its lowest level in over two weeks amid the Bank of Japan (BoJ)-inspired rally in the Japanese Yen (JPY). However, hawkish central bank expectations might keep a lid on any meaningful appreciation for the non-yielding bullion.

A 25 basis point (bps) rate hike by the European Central Bank (ECB) on Thursday is considered a done deal. Moreover, traders have fully priced in a BoJ rate hike at the September 17–18 meeting. The Reserve Bank of Australia (RBA) is also weighing a potential rate increase later this month. Meanwhile, the better-than-expected US Nonfarm Payrolls (NFP) report revived bets for a September interest rate hike by the US Federal Reserve (Fed) amid inflation risks stemming from persistently higher energy prices.

BNY sees September Fed hike as imminent after strong US jobs data

Strategists at BNY argue that the latest labour market data have firmly re‑anchored expectations for further Fed tightening. They note that “after an exceptionally strong jobs print on Friday, even Governor Christopher Waller’s somewhat equivocal comments on Thursday don’t seem to be enough to change our view that a rate hike is imminent.” According to BNY, “after dropping somewhat last Thursday on the basis of Waller’s remarks, the expectation for a September hike is back to over 60%. We would be surprised to not get one.”

Adding to this, escalating US-Iran tensions could help limit deeper losses for the safe-haven USD and cap gold prices. In the latest developments surrounding the Middle East crisis, the US attacked Iranian oil tankers in the Gulf of Oman and near Kharg Island. Iran responded by firing over 30 missiles at US forces stationed at the Al Azraq base in Jordan. Moreover, Iran’s Islamic Revolutionary Guard Corps (IRGC) warned that ships in Kuwaiti and Bahraini ports hosting US forces could also be targeted.

This keeps the geopolitical risk premium in play, lifting crude oil prices to a three-month high and fueling inflation fears. This underpins prospects for Fed tightening, which should act as a tailwind for the USD and keep a lid on gold prices. Traders might also await the release of US inflation figures – the Producer Price Index (PPI) and the Consumer Price Index (CPI) on Thursday and Friday, respectively – for cues about the Fed’s policy path before placing fresh directional bets on the XAU/USD pair.

XAU/USD 4-hour chart

Technical Analysis

The precious metal finds support near the $4,345-$4,340 confluence – comprising the 200-period Simple Moving Average (SMA) on the 4-hour chart and the 50.0% retracement level of the July-August upswing. This should act as a key pivotal point. Meanwhile, the daily Relative Strength Index (RSI) is hovering near a neutral 42, and the Moving Average Convergence Divergence (MACD) is in negative territory, hinting that the latest bounce is more a stabilization above trend support than an impulsive bullish leg.

The technical setup, in turn, suggests that the upside momentum remains fragile and is likely to face immediate resistance at the 38.2% Fibonacci retracement at $4,427. However, a break higher would expose the 23.6% retracement barrier near $4,529. On the downside, initial support is aligned near the 200-period SMA around $4,352.88, followed by the 50.0% retracement at $4,344. A clear drop below this band would open the door toward deeper Fibonacci supports at $4,262 and then $4,144.